Thursday, 2 October 2014

Companies Act 1956: Types of Prospectus

Prospectus issued by company is of different types and
depending upon the circumstances the prospectus is issued.

Following are the major types of prospectus.

Ordinary prospectus:

It is the common form of prospectus issued by any company.

Deemed
Prospectus:-

When a company issues its securities to issuing house and
the issuing house later on transfers these securities later on to public then
the issuing house issues an offer document, this offer document is known as
deemed prospectus. This deemed prospectus has all the contents of prospectus
and it has to fulfill all the legal conditions regarding the prospectus.

Red herring
prospectus:

This prospectus is issued by those companies who issue the
securities by book building process hence in this process the price of
securities will be calculated depending upon the demand from public. In this prospectus
all the contents of a regular prospectus are present however it does not have
the issue price of securities. The issue price is decided later on after which
the company will issue an information memorandum which will contain the issue
price of securities along with the necessary information.

Information
Memorandum:

It is a document issued by company after issue of Red
herring prospectus and after the issue of shelf prospectus. The Information
Memorandum contains that information which was not mentioned in the Red
herring prospectus or shelf prospectus. This information memorandum is also
submitted to ROC and it is also registered with the ROC like the normal
prospectus.

Statement in lieu
of Prospectus:

Statement in lieu of Prospectus is issue by the company when
the company does not issue securities to public. This statement has all the
contents of the prospectus and is registered with ROC like the normal
prospectus. This statement is issued by company in private placements. The Slp
also has the penalties if there is a misstatement.

Shelf prospectus:

This is the prospectus which is
issued by financial institutions and this prospectus remains valid for twelve
months. This prospectus is issued so that the financial institution can issue
the securities more than once during 12 months. During the process of issue of
shelf prospectus the financial institution must issue information memorandum
for the change on the company which have taken place in between the date of
issue of prospectus and the date of issue of securities.

Summary or Abridged prospectus:

According to companies act 1956
every application form for purchasing the shares of company must be issued only
with a copy of prospectus hence application form cannot be issued without a
copy of prospectus. To save the resources and money a summary prospectus is
prepared and this summary prospectus will be attached to the application form.
This prospectus must have all the contents of a regular prospectus hence
summary prospectus is also issued in the same manner in which a regular
prospectus is issued.